Even if all inflows materialize: Govt anticipates $2.4bn external financing gap

ISLAMABAD: The Ministry of Finance has worked out conservative estimates of the external financing gap and estimated that if all external inflows were materialised within the stipulated timeframe even then there would be a gap of $2.4 billion.

“The Ministry of Finance has made official projection of securing official dollar inflows in the shape of foreign loans, rollovers, and oil facility to the tune of $26 billion against the total outflows of $28.4 billion in the shape of foreign loan repayments and fulfilling needs of Current Account Deficit (CAD) of the current fiscal year, indicating surfacing of an external financing gap of $2.4 billion for the current fiscal year,” top official sources confirmed while talking to The News here on Monday.

Out of $26 billion external inflows, $11 billion would be from Saudi Arabia and China in the shape of rollover and oil facility on deferred payments. The possible inflows from KSA have been envisaged to the tune of $6 billion in the shape of rollover and oil facility,” said the official. There is the possibility of $5 billion from China in the shape of the rollover of SAFE deposits and commercial refinancing of foreign loans in the current fiscal year.

The government is projecting $6.3 billion from multilateral creditors such as the World Bank, Asian Development Bank, Islamic Development Bank, and Asian Infrastructure Investment Bank (AIIB) during the current fiscal year. Although, the pace of disbursement has not been up to the desired mark so far, the government is hopeful for accelerating the disbursements in the months ahead of the current fiscal year.

The government has envisaged a $3 billion under nine-month Standby Arrangement (SBA) programme from the IMF for the current fiscal year. Pakistan had already secured $1.2 billion and was expecting to get another $700 million in case of completion of the first review and release of the second tranche by December this year.

The IMF’s review mission is expected to hold review talks by the end of October or early November for the completion of the review and release of the tranche. The second review is expected to take place in February 2024 and release of the third tranche worth around $1 billion.

The Finance Ministry also envisaged securing commercial loans of $5 billion during the current fiscal year which might be a hard nut to crack keeping in view the rising interest rate around the globe. The government has also envisaged another $0.7 billion from all other avenues during the current fiscal year. So the total foreign inflows have been projected at $26 billion.

The external debt repayments have been envisaged at $21.9 billion for the current fiscal year. The public debt repayments have been estimated at $16.1 billion while private external debt repayments stood at $5.8 billion. The CAD is estimated at $6.5 billion so the total external requirements climbed to $28.4 billion.

However, independent economists did not buy the assessment done by the Finance Ministry and argued that the external needs stood at $30 billion compared to the inflows of $26 billion, so the gap might be on the higher side than the official projections.

The government has also envisaged a five-point agenda to build up foreign exchange reserves held by the State Bank of Pakistan through incentivising export growth to achieve $40 billion in goods and services, implementing the Sohni Dharti scheme for incentivising remittances from formal channels as the government allocated Rs80 billion for luring banks to increase the remittances through official channels from abroad. There is a need to ensure the timely realisation of $ 26 billion in official external flows for FY2024, incentivise FDI in export sectors (Agriculture, mining, IT), and tap the $4 trillion carbon credit market.

This scribe contacted a senior Finance Division official for seeking official version who replied back that they did not agree to this gap mainly because it incorporated private inflows and outflows which did not represent government’s requirements. However, he did not prefer to share any specific figures on account of surfacing external gap.